Tiny Chevrolet Sonic helps Detroit shake off rust
About that time, Orion Township’s chief executive, Matt Gibb, got a call from Ed Montgomery, President Obama’s auto-recovery czar, telling him the plant was on a secret list of GM factories to be closed. The factory was the township’s largest employer and taxpayer. About a third of its 35,000 residents work for GM, Chrysler or parts suppliers.
As Gibb watched the local economy unravel, he was haunted by a documentary he had seen about Janesville, Wis., where another GM plant had closed, leaving behind empty industrial parks and ball fields overgrown with weeds.
‘‘I don’t want to be Janesville,’’ he told friends.
ANGUISH AND ANOTHER CHANCE
GM, meanwhile, was drowning, even with emergency loans from the government. On June 1, 2009, it became the largest American industrial company ever to file for Chapter 11 bankruptcy protection. It had just $2 billion in cash and $172.8 billion in liabilities.
The bankruptcy wiped out GM’s debts, allowed it to shed 21,000 jobs, dump 2,600 dealers and close factories, including Orion.
‘‘It was like somebody just took the heart out of you,’’ recalled Mike Dunn, the chief United Auto Workers union bargainer at Orion. ‘‘You didn’t really know if you would have a future.’’
Worries spun through his head. He had to support six kids, including two in college. He was nearing retirement after 28 years at GM, and his pension was in jeopardy. But as he walked toward the plant floor, his immediate concern was what to say to workers.
‘‘You can’t let the people know you’re devastated and scared for your life,’’ he said. ‘‘I had to tell my people to stay positive and good things would happen.’’
As lawyers for GM and its creditors fought in court over scraps of the company, Orion’s second chance emerged.
In exchange for its $50 billion bailout, the government got a 60 percent stake in the company and GM agreed to build a tiny car known as the Sonic at one of the U.S. plants it was closing. Small-car production had long been relegated to other countries where wages weren’t as high. But GM couldn’t take government money and build a small car overseas.
For folks in Orion like Dunn and Pat Sweeney, the local union president, the mission was clear: Get the Sonic.
First, they met with Michigan Gov. Jennifer Granholm and other state officials, who promised GM a $779 million, 20-year tax credit.
Gibb spent all spring organizing petition drives and thinking of ways to cut the plant’s costs. So when an army of GM lawyers and tax experts showed up at his office, he was ready with a generous package of tax incentives. The township also promised a new $4.5 million water-storage tower and pledged to buy water at off-peak hours so GM could get lower rates.
The tax abatement cost the township and its schools about $780,000 per year, but Gibb said it was worth it to save the plant’s roughly 3,600 jobs. If the plant closed, he estimated that half of the area’s commercial properties would be vacant within two years. Plus, the township was competing with Janesville and Spring Hill, Tenn., which had a newer factory than Orion.
At the end of June, GM made up its mind: The Orion factory would get the small car. But there was a catch. The plant had to shut down for more than a year to be revamped — a closure that would further threaten businesses in a fragile economy.
Dunn watched as workers removed the plant’s equipment, knowing GM could pull out of the deal at any time.
‘‘You could see from one end to the other,’’ he said. ‘‘There was nothing in there but cement and pillars.’’
NEGOTIATING A FUTURE
There was another obstacle. GM and the UAW had to figure out how to cut labor costs at the plant.
For decades, the UAW and automakers fought openly as the companies tried to reduce costs and the union demanded pay increases. The UAW would strike, or threaten to, and the companies would cave in. By 2007, GM was paying $1,400 more per vehicle for labor than nonunion Toyota.
That same year, both sides agreed to a historic compromise on labor costs. They established a two-tier wage system that would pay new employees around $14 an hour, or half the hourly wage of older workers. Worker pay and pensions were frozen. Union trusts funded by the company and workers would take over retiree health care costs. Union President Bob King said each worker gave up at least $7,000 during the four-year contract.
But GM still couldn’t make money building the Sonic at Orion without an immediate influx of lower-wage workers. So the UAW and GM went beyond the national agreement and came up with an unprecedented solution. More lower-wage workers could be hired at Orion than any other plant in the country. Forty percent would be paid the lower wage, as opposed to a maximum of 25 percent at other factories.Continued...